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CA Intermediate · Auditing and Ethics · Ethics and Terms of Audit Engagements

During the audit of Tarang Pharma Ltd., management asks CA Imran to change the engagement from an audit to a review engagement, which provides lower assurance, after he has begun work. Management says the change is because the audit is costly and takes time. What is the correct response under SA 210?

The auditor should agree to a change to a lower-assurance engagement only if there is reasonable justification. Cost or time is not enough. If no justification exists and the audit cannot continue, he should withdraw where permitted and consider reporting obligations, as SA 210 requires.

  1. AAgree immediately, as the client has the right to choose the engagement type
  2. BAgree only after the auditor decides there is reasonable justification for the change; if no reasonable justification exists and he is not permitted to continue the original engagement, he should withdraw where possible and consider any reporting obligationsCorrect
  3. CContinue the audit but charge double fees
  4. DIssue a disclaimer of opinion and treat the review as complete

Explanation

SA 210 says that before agreeing to change to an engagement providing a lower level of assurance, the auditor must consider the appropriateness of the reason. A request based on cost or time is not a reasonable justification. If no reasonable justification exists and the auditor is not permitted to continue the audit, he should withdraw where applicable law permits and consider any obligation to report the circumstances. Option 0 ignores this test.

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